September 28, 2023

Indian officials have remained silent about Amazon’s battle with Reliance, but they have put pressure on the American company on other fronts. The Reserve Bank of India and the Enforcement Directorate, India’s federal crime prevention agency, are investigating Amazon for alleged violations of India’s foreign investment laws. Amazon and Walmart’s Flipkart are also fighting to prevent the Competition Commission of India, the country’s antitrust agency, from opening a formal investigation into their sales practices.

In a statement, Amazon said that company officials “take compliance with all applicable laws and regulations seriously” and that it is trying to protect its rights by trying to stop the Reliance-Future Group’s deal. “We are disappointed with the motivated attempts to influence FDI policy with the aim of creating an unequal playing field,” the statement said, referring to India’s restrictions on foreign direct investment.

Neither Reliance nor the Future Group responded to emails asking for comments.

In 2018 the Indian government passed a law stating that foreign-owned e-commerce companies are only allowed to operate as neutral marketplaces where independent sellers place their products. The government said the restrictions would protect small businesses by restricting platforms like Amazon’s ability to sell their own products. For example, strict compliance with the law would have meant that Amazon couldn’t sell its popular Echo device through its own service.

The Indian government is not alone in its concerns about Amazon’s potentially dominant market power. Officials and lawmakers in the United States and Europe are increasingly gloomy about Amazon’s ability to use its data to develop and sell its own products. Still, the law has been widely interpreted as beneficial to Mr. Ambani’s foray into e-commerce.

“India’s laws on foreign investment in retail made no sense when they were enacted in the mid-2000s and they don’t make sense today,” said Arvind Singhal, chairman and general manager of Technopak Advisors, a management consultancy that focuses on retail and business Consumer goods. “The laws protect local big players in the name of protecting mom and pop stores.”

With this in mind, Amazon proceeded cautiously to get a deal with the Future Group. The Indian company was heavily in debt when it signed its pact in 2019. The agreement was structured so that it was already on the books of the strict laws governing foreign companies investing in retail.

The Future Group deal was tantamount to an option for Amazon to expand into brick and mortar stores in India should New Delhi relax its retail laws. It also enabled Amazon to use Future’s network of stores as centers for quickly shipping fresh fruit and vegetables to customers who order groceries online. Before the dispute broke out between the companies, customers were able to order vegetables from Big Bazaar stores via the Amazon app.